The monetization coefficient of the region and its impact on the development of a territorial unit’s economy

About the author:

Kuvaeva Yulia V., Cand. Sci. (Econ.), Associate Professor, Department of Finance, Money Circulation and Credit, Institute of Economics, Ural State Economic University (Ekaterinburg)
YKuvaeva1974@mail.ru

Abstract:

In recent years, the role of the financial system in the development of national economies has been widely discussed in the global and national economic literature. This article analyzes the influence the financial depth of economy has on the level of its development in some Russian regions. Notably, the notion of “financial depth of economy” is not yet sufficiently studied, and therefore, the analysis of the impact, which individual indices of “financial depth” have on the level of development of territorial entities within the state, has not received sufficient attention. The methodological basis of the study includes theoretical foundations of macroeconomic theory, describing the existence of mutual relations between the level of development of the financial sector and the economic growth. <br>
This study aims to study the possible impact of one of the indices of the financial depth of the regional economy — the coefficient of monetization of closed territorial formations within the state, which has a federal structure — on the level of the region’s economic development. The information base of the research consists of the data on 20 constituent entities of the Russian Federation with the highest and lowest value of the statistical index “funds of organizations, bank deposits (deposits) and other borrowed funds of legal entities and individuals”. <br>
The results show that the financial depth of the region’s economy according to the index “monetization coefficient” does not exceed 50%, except for two key subjects (Moscow, St. Petersburg), while in the countries with developed economies this index reaches the level of 200%. The calculated determination coefficient indicates an insignificant impact of the factor (monetization of a specific RF entity) on the variation of the effective index (GRP per capita of the sample subject). Thus, the impact of one of the indices of the financial depth of the regional economy — the coefficient of monetization of closed territorial formations — on the level of economic development of the region does not find a corresponding confirmation in the Russian experience.

References:

1. Vardevanyan G. 2006. “Comparative analysis of GDP monetization coefficient in Belarus, Russia, and Ukraine”. Belarusian Economic Journal, no 4, pp. 71-74. [In Russian]

2. Zotova A., Golovenko E. 2015. “Concept of ‘financial depth’ of economy and its indicators”. Economy and Entrepreneurship, no 5-2 (58-2), pp. 411-414. https://elibrary.ru/item.asp?id=23804809 [In Russian]

3. Igonina L. 2019. “Influence of the financial sector development on the economy of Russian regions”. Fundamental Research, no 7, p. 61. [In Russian]

4. Malkina M. Yu. 2010. “On the issue of money supply sufficiency and quality of money in the economy”. Management Issues, no 1 (10), pp. 102-115. http://vestnik.uapa.ru/ru/issue/2010/01/09/ [In Russian]

5. Manevich V. Е. 2005. “Money supply in the Russian economy”. Biznes i banki, no 41, pp. 2-14. http://www.ipr-ras.ru/articles/manev05-3.pdf. [In Russian]

6. Mirkin Ya. 2011. Financial Future of Russia: Extrema, Booms, and System Risks. Moscow: GELEOS Publishing House: Capital Trade Company. [In Russian]

7. Mirkin Ya. 2015. “Economic and statistical study of the financial depth of the economy”. Vestnik NGUEU, no 4, pp. 24-29. [In Russian]

8. Mamonov M., Pestova A., Pankova V., Akhmetov R., Solntsev O. 2017. “Series of reports on economic research. Financial sector, economic growth and macroeconomic stability”. Central Bank of Russia, no 21. http://www.cbr.ru/Content/Document/File/16718/wp_21.pdf [In Russian]

9. Solodkaya T., Tali M., Industriev M. 2018. “Analysis of banking sector influence on economic growth of the Russian Federation”. Izvestiya of Saratov University. (New Series), Series: Economics. Management. Law. Volume 18, no 2, pp. 148-154. DOI: 10.18500/1994-2540-2018-18-2-148-154 [In Russian]

10. Sukharev, O. 2017. “Economic growth and financial institutions: impact on macro- and microlevels”. Financial Journal, no 2 (36), p. 83. [In Russian]

11. Federal State Statistics Service. https://www.gks.ru [In Russian]

12. Central Bank of the Russian Federation. http://www.cbr.ru/ [In Russian]

13. Arcand J. L., Berkes E., Panizza U. 2012. “Too much finance?”. Journal of Economic Growth, vol. 20, no 2, pp. 105-148.

14. Boyreau-Debray G. 2003. “Financial intermediation and growth. Chinese style”. World Bank Policy Research Working Paper 3027. April. The World Bank. Development Research Group Investment Climate. http://documents.worldbank.org/curated/en/968041468743994539/pdf/multi0page.pdf

15. Cheng X., Degryse H. 2010. “The impact of bank and non-bank financial institutions on local economic growth in China”. Journal of Financial Services Research, vol. 37, no 2, pp. 179-199.

16. Cihak M., Demirguc-Kunt A., Feyen E., Levine R. 2012. “Benchmarking financial systems around the world’. Policy Research Working Paper 6175. The World Bank. Financial and Privatе Sector Development Vice Presidency & Development Economist Vice Presidency. August. http://documents.worldbank.org/curated/en/868131468326381955/pdf/wps6175.pdf

17. Goldsmith R. 1969. Financial Structure and Development. New Haven: Yale University Press.

18. Law S. H., Singh N. 2014. “Does too much finance harm economic growth?”. Journal of Banking and Finance, no 41, pp. 36-44.

19. Ono S. 2012. “Financial development and economic growth: evidence from Russia”. Europe-Asia Studies, vol. 64 (2), pp. 247-256.

20. Sahay R., Cihak M., N’Diaye P., Barajas A., Bi R., Ayala D., Gao Y., Kyobe A., Nguyen L., Saborowski C., Svirydzenka K., Yousefi S. R. 2015. “Rethinking financial deepening: stability and growth in emerging markets”. IMF staff Discussion Note SDN/15/08. https://www.imf.org/external/pubs/ft/sdn/2015/sdn1508.pdf